Friday, 1 December 2017

Whether Arbitration Proceeding is maintainable after Imposition Of Moratorium U/S.14 Of Insolvency And Bankruptcy Code?

The mandate of the new Insolvency Code is that the moment an
insolvency petition is admitted, the moratorium that comes into
effect under Section 14(1)(a) expressly interdicts institution or
continuation of pending suits or proceedings against Corporate
Debtors.
6) This being the case, we are surprised that an arbitration
proceeding has been purported to be started after the imposition of
the said moratorium and appeals under Section 37 of the Arbitration
Act are being entertained. Therefore, we set aside the order of
the District Judge dated 06.07.2017 and further state that the
effect of Section 14(1)(a) is that the arbitration that has been
instituted after the aforesaid moratorium is non est in law.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 16929 OF 2017
(Arising out of S.L.P. (C) No. 18195/2017)
ALCHEMIST ASSET RECONSTRUTION COMPANY LTD. 
 V
M/S. HOTEL GAUDAVAN PVT. LTD. & ORS. 
Dated:October 23, 2017.


1) Leave granted.
2) Heard the learned Senior Counsel/Counsel appearing for the
parties.
3) The facts of the present case disclose a very sorry state of
affairs. Several proceedings had been taken and ultimately a
petition filed under the Insolvency and Bankruptcy Code, 2016 was
admitted on 31.03.2017 by the National Company Law Tribunal,
Principal Bench, New Delhi. As a result, the moratorium that is
imposed by Section 14 came into effect on that date and Respondent
No.3 has been appointed as the Interim Resolution Professional
(IRP). A Writ Petition was filed against this order, which was
admitted only to the extent of the challenge to the vires of the
Insolvency Code, is pending. A Special Leave Petition against this
order was dismissed on 26.04.2017. Meanwhile, despite the
moratorium, a letter was issued by Respondent No.1 to Respondent
No.2 invoking the arbitration clause between the parties and Shri
Pankaj Garg, an Advocate, was appointed as Sole Arbitrator. Shri
Garg entered upon the reference. In an other order dated2
31.05.2017, the National Company Law Tribunal, Principal Bench, New
Delhi referred to Section 14 (1)(a) of the Insolvency Code and
stated that given the moratorium that is imposed, no arbitration
proceedings could go on. A notice was issued on 29.06.2017 by the
National Company Law Tribunal, Principal Bench, New Delhi in C.A.
No. 186(PB) of 2017.
4) A First Appeal was filed before the District Judge, Jaisalmer,
Rajasthan under Section 37 of the Arbitration and Conciliation Act,
1996 and by the impugned order dated 06.07.2017, the appeal was
asked to be registered and notice was issued awaiting a reply.
5) The mandate of the new Insolvency Code is that the moment an
insolvency petition is admitted, the moratorium that comes into
effect under Section 14(1)(a) expressly interdicts institution or
continuation of pending suits or proceedings against Corporate
Debtors.
6) This being the case, we are surprised that an arbitration
proceeding has been purported to be started after the imposition of
the said moratorium and appeals under Section 37 of the Arbitration
Act are being entertained. Therefore, we set aside the order of
the District Judge dated 06.07.2017 and further state that the
effect of Section 14(1)(a) is that the arbitration that has been
instituted after the aforesaid moratorium is non est in law.
7) Mr. Jayant Bhushan, learned Senior Counsel, also informs us
that criminal proceeding being F.I.R. No. 0605 dated 06.08.2017 has
been taken in a desperate attempt to see that the IRP does not
continue with the proceedings under the Insolvency Code which are
strictly time bound. We quash this proceeding.
8) As a result, the appeal is allowed and the steps that have to be
taken under the Insolvency Code will continue unimpeded by any
order of any other Court.
 .......................... J.
 (ROHINTON FALI NARIMAN)
 .......................... J.
 (SANJAY KISHAN KAUL)
New Delhi;
October 23, 2017.


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